InvestorQ : Do you think a balanced advantage fund is better than stocks and mutual funds?
vani Patil made post

Do you think a balanced advantage fund is better than stocks and mutual funds?

Anjali Desai answered.
1 year ago
First, let us understand what is a balance advantage fund?
These are hybrid funds that are free to allocate their equity and debt exposure without any caps or minimum exposure limits from SEBI. So, these funds can change their exposure in equity and debt instruments as per the changing equity valuations with the help of their in-house proprietary models. These models help their funds to eliminate human biases during making major investing decisions. These funds also maintain exposure to equity derivatives to implement hedging strategies.

What are the benefits?
  • It aims to provide regular income through exposure to fixed income instruments and provide stability to the investors.
  • Investors get better returns that are closer to equity returns but have significantly lower volatility.
  • These funds combine the features of potential capital appreciation, preservation, and controlling volatility.
  • Offers higher tax efficiency as compared to the asset allocation chosen by the investor himself, as portfolio rebalancing decisions are taken based on well-defined and time-tested models without any biases.
  • It aims to generate capital gains through its dynamic management of equity allocation matching with the varying market conditions.
Since you have all the benefits of this scheme on the plate, you should compare it with the benefits that any mutual fund or stock investment can give you. If you invest in mutual funds, you can have a diversified portfolio. However, you can choose to invest in an all-equity investment or a hybrid fund. The only drawback could be comparatively lower returns.

In the case of investment in the stock market, your exposure would be complete to the equity market. There will be higher returns, however, you will have to face higher volatility. So, you need to weigh the pro and cons of each scheme/investment and decide the one that suits your risk appetite, investment objective, and other criteria.